Skip to content Skip to Search
Skip navigation

Private credit lenders expect surge in ‘last mile’ finance

Building workers on site in Riyadh. Last mile funding opportunities 'remain very interesting', said one industry expert Reuters/Ahmed Yosri
Building workers on site in Riyadh. Last mile funding opportunities 'remain very interesting', said one industry expert
  • Building projects often need extra funds
  • Non-bank lending eases liquidity crunch
  • Demand set to rise in Saudi and UAE

Private credit firms are preparing for a surge in demand for “last mile” financing from construction companies across the Middle East.

This form of financing plays a critical role in the delivery of projects that are on the brink of completion but have been hit by budget overruns or unforeseen costs.

William Watson, a partner in the Dubai office of law firm White & Case, told AGBI the practice was in talks with international private credit providers who “expect an increased demand” in Saudi Arabia, the UAE and elsewhere in the Gulf.

Providers “are particularly focused on the need for current and proposed levels of key construction and development to be completed in both jurisdictions”, said Watson, especially given “global interest and inflation trends”.

Private credit is non-bank lending, where investors step in to alleviate liquidity crunches.

Naveen Bhojwani, managing director of debt advisory, restructuring and special situations for emerging markets at Rothschild & Co, said “last mile” finance and opportunities in real estate “remain very interesting”.

Bhojwani pointed to projects where developers had “done a runner”, but also to the Gulf’s record on payment delays.

Receivable days – the number of days that an invoice remains unpaid – can “go north of 350 to 400 days” even on projects “with good-quality contracting firms” and creditworthy clients, he said.

“The extent of the receivable days here has always been a problem, so that working capital dynamic has often been the trigger,” Bhojwani said.

Vikas Papriwal, senior managing director at FTI Consulting, Middle East and Africa, added that construction firms were still facing “legacy payment issues” from previous development cycles.

He warned that Gulf states were susceptible to global monetary policy trends, despite benefiting from high oil prices. Regional headwinds are only “delayed”, he said.

The Middle East is among the worst-performing regions for construction delays, according to a 2023 report.

Construction overruns added 82 percent to schedules in the Gulf, well up on the global average of just over 67 percent.

A series of restructurings have taken place across the industry, with developers such as Union Properties and Falconcity World of Wonders adjusting their strategies to respond to market shifts.

Contractors such as Drake & Scull continue to struggle while Arabtec, best known for building the Burj Khalifa, ceased operations during the Covid pandemic.

White & Case’s Watson added that the UAE’s plan to set up a specialist bankruptcy court, part of the overhaul of its restructuring laws, had been welcomed by creditors and industry figures.

“The most common concern raised to us by private credit providers has been a perceived lack of effectiveness of regional insolvency regimes,” he said, adding that the new laws have yet to be tested. 

Latest articles

Wind turbines above the village of Kotronas in the Peloponnese region. Greece's Terna Energy invests in wind, solar, hydroelectric and pumped storage projects

Masdar buys Greece’s biggest investor in renewables

The UAE’s state-owned clean energy company Masdar is to acquire a majority share in Terna Energy of Greece. The initial deal – one of the largest in the European renewables market and the biggest ever energy transaction on the Athens Stock Exchange – is for a 67 percent stake. The price of €20 ($21.45) per […]

The UAE attracted FDI inflows of $30.7 billion last year, a 35 percent year-on-year growth

UAE ranks second in global greenfield FDI projects

A 33 percent year-on-year surge in greenfield FDI projects in the UAE catapulted the Emirates up two places to the second spot after the US in 2023. There are now 1,323 greenfield FDI project announcements, state-run Wam news agency reported, citing the World Investment Report 2024. The UAE attracted FDI inflows of $30.7 billion last […]

People walk through the souk in Manama, Bahrain; FDI has been encouraged by the golden licence programme for investors

Bahrain attracts a record $6.8bn in foreign investment

Bahrain has set a new record by attracting $6.8 billion in foreign direct investment (FDI) in 2023. This is a 148 percent increase from the previous year’s $2.8 billion, according to the latest World Investment Report by the UN Conference on Trade and Development. Kuwait emerged as the top contributor, accounting for 36 percent of […]

UAE AI tech major G42 said it was 'doubling down on Cerebras' after trying its CG1 supercomputer

Abu Dhabi-backed chipmaker Cerebras plans IPO

Cerebras Systems, an Abu Dhabi-backed chipmaker looking to compete with Nvidia, the world’s top chip company by market value, has confidentially filed for an initial public offering, according to reports. Based in California’s Silicon Valley, Cerebras is also planning to offer preferred shares at a significant discount, aiming to attract private investors before the IPO, […]